Study 5 - Underwriting the Risk: Liability Flashcards
Define liability insurance
insurance that agrees to indemnify the insured for sums she may be required by law to pay to third parties as damages for bodily injury or damage to property. The maximum amount of insurance provided under a policy of liability insurance
Define third-party insurance
liability insurance is purchased by the insured (first party) from an insurer (second part) to compensate or indemnify another (third party) for damage or loss for which the insured is lawfully liable
What must a plaintiff review in a liability suit?
(The ABC Rule)
- Defendant owed the plaintiff (A) duty of care
- The defendant (B)roke that duty of care by his or her actions
- The defendant’s actions (C)aused injury to the plaintiff
What three criteria must be met for an incident to become a loss under a liability policy?
- Third party must consider the injury serious enough to pursue a grievance
- The grievance must be difficult enough to resolve that they cannot settle out of court
- The resulting trial must end in favour of the third party
Define statute law
A law set down in a government act and passed by legislature
What are the three jurisdictions of law?
Federal
Provincial/territorial
Municipal
What are some examples of what is covered under federal law?
Military affairs, foreign relations, the natuional currency, the postal service, financial regulation of banks and insurance companies, among others
What are some examples of what is covered under provincial law?
Property rights, education, health care, and the regulation of the insurance industry
What are some examples of what is covered under municipal law?
Police, fire, water and other services that municipalities are authorized to manage
Define tort
A wrongful act that has caused damage or injury to another
may be:
intentional act
negligent act
failure to act
Define negligence
Failure to use the degree of care expected from a prudent person
Define duty of care
The obligation that a person has to exercise reasonable care with respect to the interests of others, including protecting them from harm
What case was responsible for establishing the duty of care definition?
Arland v. Taylor
The ABC rule
A duty of care exists
The duty was breached
There is a causal relationship between the breach and the damage
Define hold-harmless agreement
an agreement that allows one party to protect another party against any future losses or claims that may result from a particular activity. also known as indemnity agreement
Define indemnity agreement
a written contract entered into between the indemnitor and surety in which the indemnitor secures surety against loss the surety may sustain as a result of having issued a bond for a third party (usually a company owed by the indemnitor) or for the indemnitor
What are some maintenance and housekeeping questions you may ask?
What is the general condition of the building and grounds?
How well maintained are the parking lots, stairs, walkways and floors?
What is the condition of interior and exterior lighting? Is it adequate?
What is the condition of exit lights, emergency exits, and doors?
Are non-slip surfaces used in areas of high pedestrian volume?
What are the cleanup procedures? Are cleanup records or logs appropriate, and if so, are they available?
How well is the property drained? Is the drainage adequate to avoid water ponding and icing?
Are warning signs posted in hazardous areas?
What are some additional items to review for maintenance and housekeeping?
1) Does the applicant have a maintenance contract?
2) If the applicant has a maintenance contract, does it include a hold-harmless or indemnity agreement?
3) Does the lease impose obligations on the applicant concerning property maintenance?
What was the relevance of Preston v. Canadian Legion (1981)?
Parking lot was unpaved and unlit, snow removal services were in place, temperature warmed and icy conditions resulted, occupier did not modify procedures; occupier failed in its duty
What are the general steps to review for premises liability?
- Know the exposure, the occupancy and the applicant’s activities
- Understand the legal requirements in the jurisdiction where the risk is located
- Review the risk’s loss history
- Review the loss control reports
- Follow up on any recommendations outstanding from those loss control reports
- Find out whether the applicant keeps records of incidents or accidents, maintenance logs, and records of routine inspections
- Find out what contracts the applicant is party to and ask if the applicant obtains certificates of insurance from its contractors
- Understand who any additional named insureds on the application are and what their relationships are to the applicant
- Find out if the applicant is name as an additional insured on other policies, such as a contractors policy
What are some general details to review for products liability?
- Name and address of risk
- Number of years in business
- Its payroll, receipts and other measures of its financial well-being
What are some specific points to consider for products liability?
- Who manufacturers the products that the applicant sells?
- What products does the applicant manufacture? What is the final use of the product?
- Does the applicant modify or alter products received from other manufacturers before selling them?
- What is the distribution of the applicant’s products? Local, national, international? To the United States?
- Do any of the applicant’s products contain parts or materials manufactured by another company? If so, is the other company located inside of outside Canada?
- Are any of the products flammable, explosive or toxic with normal use?
- Can the consumer or end-user alter the products? Are safety devices in place to prevent this? Warnings?
- Do the products carry a warranty or an express guarantee of performance or other aspects of the products? Does the applicant install or maintain product?
- Has any product been discontinued or recalled? Why?
- Are the instruction manuals provided to consumers to indicate the correct use?
- What quality-control process has the risk implemented? Are written records kept? Are they certified by ULC or CSA?
- Does the applicant have a hold-harmless agreement?
- Does the applicant already have liability insurance?
- Has the applicant had to make a claim on existing insurance?
Define employers liability insurance
Coverage for the legal liability imposed on an employer to pay damages to an employee injured by the employer’s negligence. This is not workers’ compensation insurance, where special acts of legislature set out specifically the relationship between the employer and employee in certain cirumstances
What are three circumstances in which an employer may need liability even if the employee is eligible for workers comp?
- Working outside the jurisdiction
- If employer assumed certain liabilities under contract
- If workers compensation benefits are denied because injury was not incurred on the job
Define contributory negligence
Many accidents are the partial fault of both parties who are involved in the accident. The plaintiff who sues another party for damages may also be guilty of some negligence, which is a concurrent cause of the damage, and is therefore guilty of contributory negligence
What are some questions an underwriter would want to know about a dwelling with a swimming pool?
Swimming pool? Deck? Diving board? How deep? Fenced and locked? Supervised? Entertain guests? Child visitors? Properly chlorinated and maintained? Lifesaving equipment?
Define umbrella policy
A special form of liability policy designed to protect the insured for certain unknown contingencies over and above coverage and to provide excess insurance
What are the three main benefits of an umbrella policy?
- Limits of insurance in excess of primary
- Down down coverage to cover exposures that primary policy does not
- Territorial limits wide than primary policy
What might drop-down coverage provide in an umbrella policy?
- Broader premises liability coverage
- Excess auto liability coverage
- Coverage for liability from watercraft and non-own aircract
- Coverage of the policyholder’s employer liability
A doctor applies for insurance. She lives on a 200-acre farm and rents the land to a cattle farmer. The
applicant and her husband own two automobiles, a cottage, and a motorboat. Give FIVE (5) reasons
why the applicant should purchase an umbrella policy.
• An umbrella policy will help protect the insured for certain unknown contingencies over
and above coverages and to provide excess insurance
• Society is litigious, and as a doctor, the insured is likely to be sued for a large amount of money
• With the assets that the doctor has—farm, automobiles, cottage, motorboat, and the fact that she rents her farmland—the coverage that an umbrella policy will offer would be the most beneficial to the insured
• The personal umbrella policy may expand the insured’s liability coverage by dropping down to provide coverage that would not otherwise be available to the insured under just an ordinary personal liability policy
• The broader coverage might include excess
automobile liability coverage, employers liability coverage, broader premises liability coverage
How is governmental power in Canada divided? What are the responsibilities assigned to each level
of government?
- Divided by the Constitution Act
- Between the federal, provincial and territorial, and municipal governments
- Federal: Military affairs, foreign relations, the national currency, the postal service, financial regulation of banks and insurance companies, etc.
- Provincial and territorial: Property rights, education, health care, regulation of the insurance industry, etc.
- Municipal: Police, fire, water, and other services that municipalities are authorized by provincial governments to provide or perform within their boundaries
What is the primary intention of the commercial general liability policy? What must the plaintiff prove?
• Primarily intended to protect the insured from legal liability for unintentionally caused bodily injury or property damage to other people
• The plaintiff must prove
o the defendant owed the plaintiff a duty of care
o the defendant broke that duty of care by his or her actions
o the defendant’s actions caused injury to the plaintiff
What questions can be asked to analyze premises liability?
• Is the risk a good fire risk?
• What is the general condition of the building and the grounds?
• How well maintained is the parking lot?
• Are there any stairs or walkways?
• What is the condition of the retail store’s exit lights, emergency exits, and doors?
• Is there non-slip flooring to help prevent slip-and-fall accidents?
• Is the property drained well enough to avoid water pooling and icing?
• Are there hazardous areas? Are warning signs posted?
• What contracts does the applicant have in relation to the premises?
• Do the contracts have hold-harmless agreements?
• If the applicant doesn’t own the premises, is there a lease and does the client have any
obligation to maintain the property under the lease?
• What is the applicant’s loss history?
• Does the applicant meet the legal requirements in the jurisdiction?
• Is the applicant an additional insured on other people’s policies?
• Are there any additional named insureds on the client’s application? Who are they, and
what relationship do they have with the insured?
• Does the applicant keep a record of incidents or accidents?
• Does the applicant keep maintenance records and records of routine inspections?
• Has the applicant assumed liability for other persons under a contract?
What duty is owed to a trespasser?
- An occupier owes the lowest duty of care to a trespasser
* The occupier must treat the trespasser with common humanity
What factors involve if a duty of care to a trespasser has been breached?
- The gravity and likelihood of probable injury
- The character of the intrusion or trespass
- The nature of the premises trespassed upon
- The knowledge the occupier had or ought to have had of the likelihood of a trespasser’s presence
- The cost to the occupier of preventing harm to the trespasser
Why should one carry employers liability insurance?
• Employers liability insurance is coverage for the legal liability imposed on an employer to pay damages to an employee injured by the employer’s negligence
• In this case, the constant renovations and movement of displays could present injury to the employees
• An employee is eligible for workers’ compensation insurance if an employee is working outside the jurisdiction for a certain period of time or longer
o If the employer has assumed certain liabilities under contract
o If workers’ compensation insurance benefits are denied to an injured worker because the injury was not incurred on the job
